Amicus Curiae Brief — Cook County v. United States Ex Rel. Chandler

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' No. 01-1572 | Nov 4H 2 1

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In the Supreme Court of the United States

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COOK COUNTY, ILLINOIS, PETITIONER

UNITED STATES EX REL. JANET CHANDLER

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING RESPONDENT

THEODORE B. OLSON

Solicitor General

Counsel of Record

ROBERT D. MCCALLUM, JR.

Assistant Attorney General

PAUL D. CLEMENT

Deputy Solicitor General

MALCOLM L. STEWART

Assistant to the Solicitor

General

DOUGLAS N. LETTER

MICHAEL E. ROBINSON

Attorneys

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

QUESTION PRESENTED

Whether local government entities are subject to qui tam

actions under the False Claims Act, 31 U.S.C. 3729.

(I)

TABLE OF CONTENTS

Interest of the United States

Statement :

Summary of argumen

Argument:

Local governments have been “persons” subject

to suit under the False Claims Act since its enact-

ment in 1863

A. The text, history, and purposes of the 1863

False Claims Act establish that local govern-

ments have been subject to potential liability

under the Act since its initial passage in 1868 ....

1. When the FCA was enacted in 1863, the

term “person” was understood to encom-

compass units of local government

2. Neither the 1863 Act’s reference to the

military status of potential defendants,

nor its provision for imprisonment of

violators, suggested an intent to exclude

local governments from coverage

3. The 1863 Act was not limited to war

profiteering, but applied broadly to

all forms of fraud against the United

States

4. The 1982 FCA amendments reinforce

the conclusion that local governments

were intended to be covered by the Act

B. The text and purposes of the 1986 FCA

amen ents reinforce the conclusion that

local governments are subject to qui tam

liability under the Act

(III)

age

Table of contents—Continued: Page

1. As amended in 1986, the FCA con-

tinues to use the word “person” to

describe the class of potential defen-

dants 17

2. In amending the FCA in 1986, Congress

sought to expand strengthen the

remedies availau.te under the Act

3. The fact that the 1986 amendments

added a punitive component to the FCA

remedies does not suggest that Congress

intended to oust local governments from

the Act’s coverage

C. The Court’s decision in Stevens does not con-

trol this case 26

1. Local governments are frequently sub-

jected to forms of liability from which

the States are exempt 26

2. The reasoning of the Court in Stevens does

not indicate that local governments are

exempt from liability under the FCA 27

Conclusion 29

TABLE OF AUTHORITIES

Cases:

Alden v. Maine, 527 U.S. 706 (1999) 27

American Soc’y of Mech. Eng’rs, Inc. v. Hydrolevel

Corp., 456 U.S. 556 (1982) 22

Carey v. Piphus, 435 U.S. 247 (1978) 20, 21

City of Newport v. Fact Concerts, Inc., 453 U.S.

247 (1981) 6, 20, 22, 23, 24

Cowles v. Mercer County, 74 U.S. (7 Wall.) 118

(1869) 11

Cases Continued: Page

Louisville, Cincinnati, & Charleston R. R. v. Letson,

43 US. (2 How.) 497 (1844) 10

Monell v. New York City Dep't of Soc. Servs.,

436 U.S. 658 (1978) 7, 9,

10, 11, 12, 15, 18

Mount Healthy City Bd. of Educ. v. Doyle, 429 US.

274 (1977) 27

Smith v. Wade, 461 U.S. 30 (1983) 21

United States v. Amedy, 24 U.S. (11 Wheat.) 392

(1826) 10

United States v. Bornstein, 423 U.S. 303 (1976) .......... 2,16

United States v. McNinch, 356 U.S. 595 (1988)

United States v. Neifert-White Co., 390 U.S. 228

(1968) 15

United States ex rel. Marcus v. Hess, 317 U.S. 537

(1943) 16

United States ex rel. Springfield Terminal Ry. v.

Quinn, 14 F.3d 645 (D.C. Cir. 1994) 2-3

Vermont Agency of Natural Res. v. United States

ex rel. Stevens, 529 U.S. 765 (2000) passim

Will v. Michigan Dep't of State Police, 491 U.S. 58

(1989) 27

Constitution and statutes:

U.S. Const. Amend. XI 27, 28

Act of Mar. 2, 1863, ch. 67, 12 Stat. 696 1

§ 1, 12 Stat. 696 12, 14

12 Stat. 696-697 2

§ 3, 12 Stat. 698 2, 10, 12, 13, 14

§ 4, 12 Stat. 698

§ 6, 12 Stat. 698

Act of Apr. 20, 1871, ch. 22, § 1, 17 Stat. 13

Act of Dec. 23, 1943, ch. 377, 57 Stat. 608

Act of Sept. 13, 1982, Pub. L. No. 97-258, § 3729,

96 Stat. 978

Statutes—Continued:

Act of Nov. 8, 1985, Pub. L. No. 99-145, Tit. IX.

§ 931(b), 99 Stat. 699

Dictionary Act, ch. 71, § 2, 16 Stat. 431

False Claims Amendments Act of 1986, Pub. L.

No. 99-562, 100 Stat. 3153

False Claims Act, 31 U.S.C. 3729 et seq.

31 U.S.C. 3729

31 U.S.C. 3729 note

31 U.S.C. 37290) 1, 3, 5, 6, 17, 21-22, 27

31 U.S.C. 37 2a -)

31 U.S.C. 372862) -(7

31 U.S.C. 37 2 1e)

31 U.S.C. 37300)

31 U.S.C. 3730(b\(1)

31 U.S.C. 3730(b\(2)

31 U.S.C. 3730(b)\(4\(B)

31 U.S.C. 3730(e\(1)

31 U.S.C. 3730(d)

31 U.S.C. 3733(1(4)

Federal Civil Penalties Inflation Adjustment Act

of 1990, Pub. L. No. 101-410, 104 Stat. 890 4

Program Fraud Civil Remedies Act of 1986, 31 U.S.C.

3801 et seg. 28

31 U.S.C. 3801(aX6) 28

42 US.C. 1983 6, 8, 9, 20, 21, 24, 27

Miscellaneous:

64 Fed. Reg. 47,104 (1999) 4

H.R. Rep. No. 660, 99th Cong., 2d Sess. (1986) ................ 1,

18, 19, 24

S. Rep. No. 345, 99th Cong., 2d Sess. (1986) . 3, 18, 25-26

8 — o

eee sees.

In the Supreme Court of the United States

No. 01-1572

Cook COUNTY, ILLINOIS, PETITIONER

UNITED STATES EX REL. JANET CHANDLER

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING RESPONDENT

INTEREST OF THE UNITED STATES

This case involves a qui tam suit against a county under

the False Claims Act (FCA), 31 U.S.C. 3729 et seg. The

question presented is whether a county or other unit of local

government is a “person” subject to potential liability under

the Act, see 31 U.S.C. 3729(a). Because the FCA is the pri-

mary mechanism by which the federal government recoups

losses suffered through fraud, and because the government

receives the bulk of any award obtained through a qui tam

action, the United States has an interest in the proper

construction of the Act.

STATEMENT

1. The FCA “is used as the primary vehicle by the Gov-

ernment for recouping losses suffered through fraud.” H.R.

Rep. No. 660, 99th Cong., 2d Sess. 18 (1986) (House Report).

The FCA was enacted in 1863 (see Act of Mar. 2, 1863, ch. 67,

12 Stat. 696 (1863 Act)), and “was originally aimed princi-

pally at stopping the massive frauds perpetrated by large

(1)

contractors during the Civil War,” United States v. Born-

stein, 423 U.S. 303, 309 (1976). The 1863 Act provided that

“any person not in the military” who submitted a false or

fraudulent claim for payment by the United States govern-

ment would “forfeit and pay to the United States the sum of

two thousand dollars, and, in addition, double the amount of

damages which the United States may have sustained.” § 3,

12 Stat. 698.

The 1863 Act further provided that a suit to recover the

statutory remedies “may be brought and carried on by any

person, as well for himself as for the United States; the same

shall be at the sole cost and charge of such person, and shall

be in the name of the United States.” § 4, 12 Stat. 698. If the

suit resulted in a monetary recovery, the award was divided

evenly between the private plaintiff and the United States.

§ 6, 12 Stat. 698. In authorizing suits by private parties

(known as relators) to collect the statutory forfeitures, the

1863 Act employed a venerable mode of procedure commonly

referred to as a qui tam action. See Vermont Agency of

Natural Res. v. United States ex rel. Stevens, 529 U.S. 765,

768 & n.1 (2000).

The Act was amended in 1943 to preclude “parasitic{al]”

qui tam actions based upon information in the government’s

possession; to authorize the government to take over the

prosecution of qui tam suits; and to reduce the relator’s

share of any recovery that such actions produced. Act of

Dec. 23, 1943, ch. 377, 57 Stat. 608; see United States ex rel.

Springfield Terminal Ry. v. Quinn, 14 F.3d 645, 649-650

' The 1863 Act separately provided that “any person

— ef Gp Gahed Gite, — — 1

United States, in time of war,” who committed any of the proscribed acts

would be subject to “trial by a court-martial, and if found guilty shall be

punished by fine and imprisonment, or such other punishment as the

court-martial may adjudge, save the punishment of death.” § 1, 12 Stat.

(D.C. Cir. 1994). In 1982, Congress recodified the Act and

amended, inter alia, its liability provision, replacing the

phrase “any person not in the military or naval forces of the

United States, nor in the militia called into or actually em-

ployed in the service of the United States,” with the phrase

Aal person not a member of an armed force of the United

States.” See Act of Sept. 13, 1982, Pub. L. No. 97-258,

§ 3729, 96 Stat. 978; 31 U.S.C. 3729 note; Stevens, 529 U. S. at

782. In 1985, Congress mandated the award of treble (rather

than double) damages in any FCA case involving “a false

claim related to a contract with the Department of Defense.”

See Act of Nov. 8, 1985, Pub. L. No. 99-145, Tit. IX, § 931(b),

99 Stat. 699; 31 U.S.C. 3729 note.

After a comprehensive re-examination of the FCA, Con-

gress enacted the False Claims Amendments Act of 1986,

Pub. L. No. 99-562, 100 Stat. 3153, which substantially

revised the Act “{iJn order to make the statute a more useful

tool against fraud in modern times.” S. Rep. No. 345, 99th

Cong., 2d Sess. 2 (1986) (Senate Report). In its current form,

the FCA prohibits “[ajny person” from “knowingly pre-

sentlingl, or caus[ing] to be presented, to an officer or

employee of the United States Government or a member of

the Armed Forces of the United States a false or fraudulent

claim for payment or approval.” 31 U.S.C. 372%a)(1). The

Act also prohibits a variety of related deceptive practices in-

volving government funds and property. 31 U.S.C.

37290) (2) -(7). The Act defines “claim” to include “any

request or demand, whether under a contract or otherwise,

for money or property which is made to a contractor,

grantee, or other recipient if the United States Government

provides any portion of the money or property which is

requested or demanded.” 31 U.S.C. 3729%c). At the time of

the events that gave rise to this suit, a “person” who violated

the FCA was “liable to the United States Government for a

civil penalty of not less than $5,000 and not more than

$10,000, plus 3 times the amount of damages which the Gov-

ernment sustains.” 31 U.S.C. 3729(a).”

The FCA continues to authorize enforcement actions to be

filed either by the Attorney General or by private relators.

Section 3730(a) provides that “{i]f the Attorney General

finds that a person has violated or is violating section 3729,

the Attorney General may bring a civil action under this

section against the person.” 31 U.S.C. 3730(a). Section

3730(b)(1) states that “[a] person may bring a civil action for

a violation of section 3729 for the person and for the United

States Government. The action shall be brought in the name

of the Government.” 31 U.S.C. 3730(b)(1).

When a qui tam action is filed, the government may inter-

vene in the suit “within 60 days after it receives both the

complaint and the material evidence and information,”

31 U.S.C. 3730(b)(2), in which case the government “shall

have the primary responsibility for prosecuting the action,

and shall not be bound by an act of the person bringing the

action,” 31 U.S.C. 3730(c)(1). If the government declines to

take over the conduct of the litigation, “the person bringing

the action shall have the right to conduct the action.”

31 U.S.C. 3730(b)(4)(B). If a qui tam action results in the

recovery of damages and civil penalties, the recovery is di-

vided between the Government and the relator, with the

relator receiving a maximum of 30% of the total award.

31 U.S.C. 3730(d).

2. Respondent Janet Chandler was hired by the Hektoen

Institute for Medical Research to be project director of a

federally-funded program designed to treat drug-dependent

2 After the events that gave rise to this suit, the civil penalty range

under the FCA was adjusted upward to a minimum penalty of $5500 and a

maximum penalty of $11,000, pursuant to a statutory mandate applicable

to civil penalties enforced by all federal agencies. See 64 Fed. Reg. 47,104

(1999) (implementing the Federal Civil Penalties Inflation Adjustment

Act of 1990, Pub. L. No. 101-410, 104 Stat. 890).

pregnant women and to evaluate the success of the treat-

ment. Pet. App. 2a-3a, 3la-32a. Respondent subsequently

brought a qui tam action against the Institute, Cook County

Hospital, and petitioner Cook County. The gravamen of the

suit was that the defendants had violated the FCA by mis-

representing the results of the program to the federal

government and by failing in various respects to comply with

the terms of the grant and with applicable federal regula-

tions in their provision of treatment to the women who

participated in the program. Ibid. The United States did

not intervene to take over the litigation.

Petitioner moved to dismiss the claims against it, arguing,

inter alia, that as a unit of local government it could not be

held liable under the FCA. The district court initially denied

petitioner’s motion to dismiss. See Pet. App. 40a-46a. The

court found that the term “person” in Section 3729(a) in-

cludes state and local governments, id. at 40a-Ala, and that

the remedies available under the FCA are not “punitive” in

character, id. at 43a-46a.

While the suit remained pending in the district court, this

Court issued its decision in Stevens. The Court in Stevens

held that a State or state agency is not a “person” subject to

qui tam liability under the FCA. 529 U.S. at 778-787. The

Court found no clear evidence in the text or history of the

FCA that would overcome the “longstanding interpretive

presumption that ‘person’ does not include the sovereign.”

Id. at 780. The Court also observed, inter alia, that “the

current version of the FCA imposes damages that are essen-

tially punitive in nature, which would be inconsistent with

state qui tam liability in light of the presumption against

imposition of punitive damages on governmental entities.”

Id. at 784-785.

Relying on Stevens, petitioner sought reconsideration of

the district court’s earlier order denying its motion to dis-

miss. The district court granted that motion and dismissed

respondent’s complaint against petitioner. Pet. App. 27a-

29a. The court found it “quite clear that under Stevens the

County is immune from the imposition of punitive damages,

which are mandatory if liability is found under the FCA.”

Id. at 28a.

3. The court of appeals reversed. Pet. App. la-26a. The

court stated that “by 1844, both private and municipal cor-

porations were presumptively included within the meaning

of ‘person.’ Nowhere in the text [of Section 3729] is there an

exception for suits against municipalities. Nor have the

parties suggested any other statutory provision that would

limit the text before us.” Id. at 8a (citation omitted). The

court explained that the purpose of the 1986 FCA amend-

ments was to increase the effectiveness of the Act, id. at Ila,

and it found that “a study of the text and structure of the

Act, supported by the available legislative history, leads to

the conclusion that Congress intended to include counties

within the meaning of ‘person’” in Section 3729(a), id. at 13a.

The court of appeals rejected petitioner’s contention that

the court was “prohibited from interpreting the statute to

include counties because of the municipalities’ traditional,

commonlaw immunity from punitive damages.” Pet. App.

13a. The court acknowledged that municipalities are not

subject to punitive damages under 42 U.S.C. 1983. Pet. App.

13a-14a (citing City of Newport v. Fact Concerts, Inc., 453

U.S. 247 (1981)). The court explained, however, that the

remedies available under the FCA differ in significant

respects from a traditional punitive damages award. Id. at

15a-16a. The court further observed that, in its view,

counties were subject to liability under the original 1863

version of the FCA, id. at 16a, and it stated that Congress, in

amending the Act in 1986, “did not indicate in any way that

it intended to exez.pt municipal entities from the scope of

the statute,” id. at 17a.

The court of appeals also rejected petitioner’s contention

that this Court’s decision in Stevens compelled dismissal of

respondent’s claims. Pet. App. 18a-20a. The court found

that petitioner’s “reading of Stevens cannot be squared with

the essential rationale of that opinion nor with the estab-

lished doctrinal differences, long recognized in our jurispru-

dence, between the status of the states of the Union and

municipal entities.” Jd. at 19a. The court observed that

the central holding of Stevens is that states are not within

the FCA’s definition of ‘person’ because of the ‘longstanding

interpretive presumption that “person” does not include the

sovereign.’” Ibid. (quoting Stevens, 529 U.S. at 780). The

court of appeals explained that, under this Court’s decisions,

“(t]he presumption cuts the other way for municipalities.”

Id. at 20a. The court concluded that “counties are not only

amenable to the FCA but also are subject to the same penal-

ties as other defendants.” Ibid.

SUMMARY OF ARGUMENT

A. As this Court held in Monell v. New York City Dep't of

Soc. Servs., 436 U.S. 658, 685-689 (1978), the term “person”

has long been understood to encompass artificial legal en-

tities, including units of local government. Nothing in the

text of the original 1863 FCA undermines the inference that

the “person[s]” subject to liability under the Act included

counties and municipalities. Moreover, local governments

are as capable as natural persons or commercial corporations

of submitting false claims to the federal government, and a

locality’s submission of a false claim causes the same harms

as a private party’s comparable wrongdoing. The text and

purposes of the 1863 FCA thus establish that the Act’s

liability provision applied to local governments.

B. The 1986 FCA amendments, which were designed to

enhance the effectiveness of the Act, did not simultaneously

‘exclude local governments from its coverage by increasing

the applicable sanctions. Congress retained the word “per-

son” to describe the class of potential FCA defendants, and

the legislative history reflects congressional awareness of

this Court’s decision in Monell. Moreover, in light of the

overriding thrust of the 1986 amendments, namely to

strengthen and expand the FCA’s remedial scheme, it is

most unlikely that Congress would have exempted local gov-

ernments from FCA coverage.

The fact that the FCA in its current form authorizes

remedies having an essentially “punitive” component does

not suggest that the 1986 amendments exempted local gov-

ernments from all liability. Unlike 42 U.S.C. 1983, which

does not explicitly address the question of damages, the

FCA specifies the sanctions to be imposed on any “person”

who is found to have committed the proscribed acts. And

while the remedies mandated by the FCA may serve in part

to punish wrongdoers, they are significantly different from

traditional punitive damages.

Finally, this Court’s precedents do not support peti-

tioner’s effort to invoke a presumption against imposition of

punitive remedies as a basis for avoiding FCA liability

altogether. The consequence of finding punitive damages

unavailable in Section 1983 actions against municipalities

was simply that punitive damages could not be recovered.

Section 1983 actions against municipalities remained avail-

able, as did compensatory damages in such cases. Here, by

contrast, petitioner advances an all-or-nothing position. Pe-

titioner suggests that by expanding liability under the FCA,

Congress ousted local governments from the Act’s coverage

entirely. Nothing in the amendments’ text or history sup-

ports that counterintuitive result. If Congress had deter-

mined that the increased damages and civil penalties man-

dated by the 1986 amendments were not appropriately im-

posed upon local governments, the far more natural course

would have been to retain, as to those defendants, the

sanctions (double damages plus $2000 per false claim) that

were available under the prior version of the Act and that

this Court had held to be predominantly remedial in

character.

C. The Court’s decision in Stevens, which held that States

are not “person[s]” subject to qui tam liability under the

FCA, does not control this case. Because state and local gov-

ernments stand on quite different constitutional footing,

there is nothing anomalous about subjecting local govern-

ments to forms of liability from which the States are exempt.

And the reasoning of the Court in Stevens is largely

inapplicable to the distinct question whether the FCA’s

liability question covers counties and municipalities.

ARGUMENT

LOCAL GOVERNMENTS HAVE BEEN “PERSONS”

SUBJECT TO SUIT UNDER THE FALSE CLAIMS

ACT SINCE ITS ENACTMENT IN 1863

A. The Text, History, And Purposes Of The 1863 False

Claims Act Establish That Local Governments Have

Been Subject To Potential Liability Under The Act

Since Its Initial Passage In 1863

In Monell v. New York City Dep’t of Soc. Servs., 436 U.S.

658, 685-689 (1978), this Court held that municipal corpora-

tions are “persons” subject to liability under 42 U.S.C. 1983,

which was originally enacted as Section 1 of the 1871 Civil

Rights Act. The Court explained that “by 1871, it was well

understood that corporations should be treated as natural

persons for virtually all purposes of constitutional and

statutory analysis.” 436 U.S. at 687. The Court also ob-

served that “since municipalities through their official acts

could, equally with natural persons, create the harms in-

tended to be remedied by § 1, and, further, since Congress

intended § 1 to be broadly construed, there is no reason to

suppose that municipal corporations would have been

excluded from the sweep of § 1.” Id. at 685-686. The same

considerations apply here.

J. When The FCA Was Enacted In 1863, The Term

“Person” Was Understood To Encompass Units Of

Local Government

As first enacted in 1863, the FCA imposed monetary

liability on “any person not in the military” who submitted a

false or fraudulent claim for payment by the United States

government. § 3, 12 Stat. 698; see p. 2, supra. In Monell,

this Court summarized its early jurisprudence concerning

the legal status of commercial and municipal corporations.

The Court observed that “[wJhen this Court first considered

the question of the status of corporations, Mr. Chief Justice

Marshall, writing for the Court, denied that corporations ‘as

such’ were persons as that term was used in Art. III and the

Judiciary Act of 1789. See Bank of the United States v.

Deveaux, 5 Cranch 61, 86 (1809).” 436 U.S. at 687. The

Monell Court further explained, however, that “(bly 1844,

* * * the Deveaux doctrine was unhesitatingly abandoned.”

Ibid. The Court quoted its decision in Louisville, Cincin-

nati, & Charleston R.R. v. Letson, 43 U.S. (2 How.) 497

(1844), which held that Ja] corporation created by and doing

business in a particular state, is to be deemed to all intents

and purposes as a person, although an artificial person.” Id.

at 558; see Monell, 436 U.S. at 687-688. The Court in Monell

then explained that “in Cowles v. Mercer County, 7 Wall.

118, 121 (1869), the Letson principle was automatically and

without discussion extended to municipal corporations. Un-

der this doctrine, municipal corporations were routinely sued

in the federal courts.” Id. at 688.

: Indeed, well before Letson the Court had held that a criminal statute

proscribing the destruction of a vessel with intent to prejudice the under-

writers applied to a corporate defendant. See United States v. Amedy,

24 U.S. (11 Wheat.) 392, 412-413 (1826). The Court explained:

Petitioner contends (Br. 16) that “inasmuch as the 1863

Act was enacted six years before the Cowles decision, the

holding in Cowles does not support the court of appeals’ posi-

tion that local governments were presumptively considered

persons in 1863.” If the decision in Cowles had overruled a

prior understanding that the legal status of municipal cor-

porations differed from that of commercial corporations,

petitioner’s argument might have some force. But neither

Cowles itself, nor the Monell Court’s description of the

Cowles holding, supports that characterization of the 1869

decision. Cowles stated that the question of a municipal

corporation’s susceptibility to suit in federal court “presents

but little difficulty.” Cowles v. Mercer County, 74 U.S.

(7 Wall.) 118, 121 (1869). In Monell, the Court explained that

in Cowles, the principle that corporations should be subject

to suit on the same terms as natural persons “was automati-

cally and without discussion extended to municipal corpora-

tions.” 436 U.S. at 688 (emphasis added). In support of its

assertion that ſulnder this doctrine, municipal corporations

were routinely sued in the federal courts,” ibid., the Monell

The mischief intended to be reached by the statute is the same,

whether it respects private or corporate persons. That corporations

are, in law, for civil purposes, deemed persons, is unquestionable.

And the citation from 2 Inst. 736 establishes, that they are so deemed

within the purview of penal statutes. Lord Coke, there, in comment-

ing on the statute of 31 Eliz. ch. 7. respecting the erection of cottages,

where the word used is, “no person shall,” &c. says, “this extends as

well to persons politic and incorporate, as to natural persons what-

soever.”

Id. at 412. In Letson itself, the Court similarly quoted with approval Lord

Coke’s statement that “every corporation and body politic residing in any

county, riding, city or town corporate, or having lands or tenements in any

shire, * * * are said to be inhabitants there.” 43 U.S. (2 How.) at 558-559

(emphasis added). Those decisions belie the suggestion that the decision

in Cowles represented a break from prior understandings of the scope of

the term “person.”

Court relied on cases decided as early as 1864, see id. at 673

n.28, 688 n.49.

Thus, both Cowles and Monell treated the suability o

municipal corporations on the same terms as natural persons

as following logically and inevitably from the Court’s 1844

decision in Letson. It is appropriate to presume that Con-

gress, in enacting the FCA in 1863, acted on the basis of the

same understanding. Indeed, petitioner cites no instance,

during the period between 1844 and 1869, in which commer-

cial and municipal corporations were treated distinctly for

these purposes.

2. Neither The 1863 Act’s Reference To The Military

Status Of Potential Defendants, Nor Its Provision

For Imprisonment Of Violators, Suggested An In-

tent To Exclude Local Governments From

Coverage

The 1863 Act contained separate provisions, establishing

distinct sanctions, for (a) “any person in the land or naval

forces of the United States, or in the militia in actual service

of the United States, in time of war,” and (b) “any person not

in the military or naval forces of the United States, nor in

the militia called into or actually employed in the service of

the United States.” §§ 1, 3, 12 Stat. 696, 698. The Act fur-

ther provided that a “person not in the military” who com-

mitted the proscribed acts was subject not only to civil

monetary sanctions, but also to criminal penalties including

* The Dictionary Act was enacted in 1871 and provided that “in all acts

hereafter passed * * * the word ‘person’ may extend and be applied to

bodies politic and corporate * * * unless the context shows that such

words were intended to be used in a more limited sense.” Dictionary Act,

ch. 71, § 2, 16 Stat. 431. As petitioner points out (Br. 16 n.7), the Die-

tionary Act applied by its terms to federal statutes “hereafter passed” and

therefore had no specific application to the 1863 FCA. The Dictionary Act -

nevertheless provides further evidence of a contemporaneous under-

standing that the term “person” as used in its ordinary sense included

“bodies politic and corporate.”

imprisonment. § 3, 12 Stat. 698. Petitioner contends (Br. 13)

that the Act’s “criminal penalties and military reference are

* * * inherently inconsistent with local governmental

liability.”

That argument is misconceived. Of course, a county or

other local governmental unit can neither be enrolled in the

military nor subjected to imprisonment. But the same is true

of commercial corporations, which have long been treated as

“person(s]” within the meaning of the Act’s liability provi-

sion. Given the established presumption that the word “per-

son” includes artificial legal entities, a commercial or munici-

pal corporation is very naturally characterized as a “person

not in the military.” And as with commercial corporations,

the fact that a municipal corporation cannot be imprisoned

does not suggest that Congress intended to exempt it from

the 1863 Act’s provisions imposing monetary liability.

In holding that States are not personſs] subject to qui

tam liability under the FCA, the Court in Stevens referred

to the above-cited provisions in concluding that “the text of

the [1863 Act] does less than nothing to overcome the

presumption that States are not covered.” 529 U.S. at 782.

With respect to corporations, however, the Court offered the

following caveat: “We do not suggest that these features

directed only at natural persons cast doubt upon the courts’

assumption that § 3729(a) extends to corporations—but that

is because the presumption with regard to corporations is

just the opposite of the one governing here: they are pre-

sumptively covered by the term person. Ibid. (citation

omitted). The Court thus made clear that any negative in-

ference that might be drawn from the 1863 Act’s references

to military status and criminal penalties would not overcome

the established presumption that the term “pereen” encom-

passes artificial legal entities such as corporations.

3. The 1863 Act Was Not Limited To War Profiteer-

ing, But Applied Broadly To All Forms Of Fraud

Against The United States

Petitioner contends that, Ipllaced in its historical context,

the 1863 Act was adopted as a response to the plundering of

the public treasury in the purchasing of necessities of war.”

Pet. Br. 18 (internal quotation marks omitted). Petitioner

states (Br. 18-19) that “[n]Jo court, to date, has identified any

case of a local government having sold military goods to the

United States during the Civil War, let alone defrauding the

United States in the sale of military goods.“ But while war-

related frauds may have furnished the immediate impetus to

enactment of the FCA, see Stevens, 529 U.S. at 781, Con-

gress did not limit the reach of the Act to war profiteering.

“In the various contexts in which questions of the proper

construction of the [FCA] have been presented, the Court

has consistently refused to accept a rigid, restrictive read-

ing,” but rather has construed the Act to extend to “all

fraudulent attempts to cause the Government to pay out

5 Contrary to petitioner’s suggestion (Br. 17), Congress’s decision in

1863 to deal separately with “person{s) in the land or naval forces of the

United States” and persons] not in the military or naval forces of the

United States” ($§ 1, 3, 12 Stat. 696, 698) does not reflect an intent that

any category of “person” would be exempt from FCA liability. Taken

together, those categories include all persons who might engage in the

prohibited conduct. Congress dealt with the two classes separately so

that military personnel who committed the proscribed acts could be sanc-

tioned in a different manner (including trial by court-martial, see § 1, 12

Stat. 697) from civilian violators. As petitioner points out (Br. 17), the

Court in Stevens rejected the “proposition that the FCA was intended to

cover all types of fraudsters.” 529 U.S. at 781 n.10. The scope of the 1863

Act’s coverage was limited, however, only in the sense that its liability

provision was restricted to “person({s}.” Congress’s decision to limit the

Act’s coverage in that manner does not suggest that any entity tradi-

tionally regarded as a legal “person” should also escape liability.

— — — Mt,

—

sums of money.” United States v. Neifert-White Co., 390

U.S. 228, 232, 233 (1968); see Stevens, 529 U.S. at 781 n.10

(explaining that Neifert-White “stand[s] for the unobjection-

able proposition (codified in [31 U.S.C.] § 3729(c)) that the

FCA was intended to cover all types of fraud”).

Counties and municipalities are as capable as natural per-

sons or commercial corporations of submitting false claims

for payment to the federal government. Submission of a

false claim by a local government, moreover, threatens the

federal fisc and the integrity of federal funding programs in

precisely the same way as does a private party’s comparable

misconduct. Compare Monell, 436 U.S. at 685-686 (constru-

ing 1871 Civil Rights Act to apply to municipalities because,

inter alia, “municipalities through their official acts could,

equally with natural persons, create the harms intended to

be remedied”). The fraudulent conduct alleged in this case

(see p. 5, supra), for example, is no less disruptive of federal

interests than comparable wrongdoing committed by a pri-

vate hospital. The legislative purposes underlying the 1863

Act therefore support, rather than undermine, application of

the established interpretive rule that the term “person” is

presumed to encompass local governments.

4. The 1982 FCA Amendments Reinforce The Conclu-

sion That Local Governments Were Intended To Be

Covered By The Act

In 1982, Congress recodified the Act and, inter alia,

amended its liability provision, replacing the phrase “any

person not in the military or naval forces of the United

States, nor in the militia called into or actually employed in

the service of the United States,” with the phrase Ja] per-

son not a member of an armed force of the United States.”

See p. 3, supra. At the time of the 1982 amendments, this

Court’s Monell decision reaffirming that the term “person”

presumptively encompasses local governments was just four

years old (see pp. 9-12, supra), and the Court had construed

the FCA expansively to cover all forms of fraud upon the

United States (see pp. 14-15, supra). Moreover, the FCA

remedies available at that time—double damages plus a civil

penalty of $2000 per false claim—had been held to serve

predominantly compensatory purposes, and so would not im-

plicate any concerns regarding punitive liability. See United

States v. Bornstein, 423 U.S. 308, 315 (1976) (FCA’s remedial

provisions reflect “the congressional judgment that double

damages are necessary to compensate the Government com-

pletely for the costs, delays, and inconveniences occasioned

by fraudulent claims”); United States ex rel. Marcus v. Hess,

317 U.S. 537, 551-552 (1943) (“We think the chief purpose of

the statutes here was to provide for restitution to the gov-

ernment of money taken from it by fraud, and that the

device of double damages plus a specific sum was chosen to

make sure that the government would be made completely

whole.”). In recodifying and amending the Act in 1982, Con-

gress would therefore have had every reason to conclude

that a provision imposing FCA liability upon “person{s]”

would be understood to cover counties and municipalities.

Under those circumstances, Congress’s decision to retain the

word “person” to describe the class of potential FCA defen-

dants reinforces the conclusion that local governments were

intended to be covered by the Act.

B. The Text And Purposes Of The 1986 FCA Amendments

Reinforce The Conclusion That Local Governments

Are Subject To Qui Tam Liability Under The Act

The 1986 FCA amendments increased the applicable

monetary sanctions, to three times the government’s dam-

ages plus a civil penalty of between $5000 and $10,000. See

pp. pee supra. (The civil penalty range has since been

increased to $5500-$11,000 to account for inflation. See note

2, supra.) In Stevens, the Court held that “the current

— >_> — —_> __

version of the FCA imposes damages that are essentially

punitive in nature.” 529 U.S. at 784; see id. at 784-786.

Petitioner contends that, even if local governments were

“person(s]” subject to suit under the FCA as originally

enacted in 1863, the effect of the 1986 amendments was to

“immuniz[e] local governments from FCA suits.” Pet. Br.

22; see id. at 21-37.

That argument lacks merit. Because Section 372% a) con-

tinues to impose liability upon a “person” who commits one

of the proscribed acts, there is no basis for inferring that

Congress intended in 1986 to narrow the range of potential

FCA defendants by ousting municipal corporations from the

Act’s coverage. To the contrary, the overall thrust of the

1986 amendments was to expand the sweep of the FCA to

make it a more effective tool for combating fraud. Con-

gress’s decision to increase the applicable monetary penal-

ties provides no ground for giving the term “person” other

than its usual construction.

1. As Amended In 1986, The FCA Continues To Use

The Word “Person” To Describe The Class Of

Potential Defendants

Like the original 1863 Act, the FCA as amended in 1986

uses the term “person” to describe the category of potential

FCA defendants. 31 U.S.C. 3729(a). The 1986 amendments

were enacted only eight years after this Court’s decision in

Monell, which explained that the term “person” had been

understood for more than a century to encompass local gov-

ernmental units. Given that settled understanding, it is most

unlikely that Congress would have continued to use the word

“person” in Section 3729(a) if it had intended to exempt local

governments from liability under the Act, or that it would

have signaled its intent to oust previously-covered localities

by so indirect and elliptical a means as expanding available

monetary remedies.

The Senate Report accompanying the 1986 amendments

expressed the understanding, with respect to the prior ver-

sion of the Act, that “[tJhe term ‘person’ is used in its broad

sense to include partnerships, associations, and corporations

* * * as well as States and political subdivisions thereof.”

Senate Report 8. In support of that proposition, the Report

cited (inter alia) this Court’s decision in Monell. Ibid. This

Court in Stevens found that legislative history to be an

insufficient basis for departing from the usual presumption

that the word “person” does not encompass States, at least

with respect to the imposition of qui tam liability under the

Act. See 529 U.S. at 780-781, 783 n.12. In the preswnt case,

however, the question is whether petitioner has carried its

burden of establishing that Congress intended the 1986

amendments to remove local governments from coverage, in

derogation of the usual presumption that the term “person”

does include localities. The Senate Report’s express refer-

ence to “political subdivisions,” and its citation to Monell,

belie that contention.

2. In Amending The FCA In 1986, Congress Sought

To Expand And Strengthen The Remedies Avail-

able Under The Act

Petitioner’s contention that the 1986 FCA amendments

entirely removed local governments from coverage also runs

counter to the overriding purposes of the 1986 legislation.

As the court of appeals recognized, “Congress’ purpose in

enacting those amendments was to increase the effective-

ness of the Act.” Pet. App. IIa; see Senate Report 2 (noting

that It he main portions of the act have not been amended

in any substantial respect since signed into law in 1863,” and

that amendments were appropriate lin order to make the

statute a more useful tool against fraud in modern times”);

House Report 16 (“The purpose of [the legislation] is to

amend the existing civil false claims statute in order to

— p —— — —

strengthen and clarify the government’s ability to detect and

prosecute civil fraud and to recoup damages suffered by the

government as a result of such fraud.”). Congress’s objec-

tive was to strengthen FCA enforcement and to expand the

remedies available to the government. Inter alia, the 1986

amendments increased the amount of damages and penalties

to be awarded for violations; clarified the Act’s scienter re-

quirement and its definition of “claim”; expanded the rights

of qui tam relators and allowed them to recover a somewhat

greater share of any monetary award; and enhanced the

government’s ability to conduct investigations prior to the

filing of FCA suits. See Howse Report 17.

In light of Congress’s overriding intent to strengthen and

expand a remedial scheme that had become outmoded over

time, it is most unlikely that Congress would have simul-

taneously exempted local governments from FCA coverage

altogether. That is especially so in light of the fact that local

governments receive a substantial, and steadily increasing,

share of federal funds. See Pet. App. 18a (“Billions of dollars

flow from the federal government to municipalities each

year.”); Pet. Br. 19 (stating that “the number of federally-

funded services provided by local governments are largely

the result of legislation passed in the latter half of the

twentieth century”). And it is particularly unlikely that

Congress would have sought to exempt such a significant

class of federal funding recipients from the Act’s enforce-

ment mechanisms without (a) changing the word (“person”)

used to describe potential FCA defendants, or (b) alluding to

such an intent at any point in the 1986 legislative history.

S. The Fact That The 1986 Amendments Added 4

Punitive Component To The FCA Remedies Does

Not Suggest That Congress Intended To Oust

Local Governments From The Act’s Coverage

In contending that the 1986 amendments should be read

to oust previously-covered localities from the scope of the

FCA, petitioner principally relies on this Court’s decision in

City of Newport v. Fact Concerts, Inc., 453 U.S. 247 (1981).

In Fact Concerts, the Court held that punitive damages are

unavailable in a suit against a municipality under 42 U.S.C.

1983. See 453 U.S. at 258-271. Petitioner contends (Br. 28)

that “[t]he absence of an explicit abrogation of immunity in

the liability provision of the FCA is a clear indication that

Congress did not intend to impose punitive damages on local

governments.” Petitioner’s reliance on Fact Concerts is

misplaced.

a. Section 1983 does not specify the remedies that are

available in a suit against a local government. Rather, it

states that

lelvery person who, under color of any statute, ordi-

nance, regulation, custom, or usage, of any State or Ter-

ritory or the District of Columbia, subjects, or causes to

be subjected, any citizen of the United States or other

person within the jurisdiction thereof to the deprivation

of any rights, privileges, or immunities secured by the

Constitution and laws, shall be liable to the party injured

in an action at law, suit in equity, or other proper pro-

ceeding for redress.

42 U.S.C. 1983 (emphasis added). Because “(t]he Members

of the Congress that enacted § 1983 did not address directly

the question of damages,” Carey v. Piphus, 435 U.S. 247, 255

(1978), this Court has relied heavily on background presump-

tions and understandings regarding the appropriate ele-

ments of recovery in particular circumstances. See, e. g.,

Smith v. Wade, 461 U.S. 30, 34 (1983) (“In the absence of

more specific guidance, [this Court has] looked first to the

common law of torts (both modern and as of 1871), with such

modification or adaptation as might be necessary to carry

out the purpose and policy of the statute.”) (citing Carey, 435

USS. at 253-264).

In Fact Concerts, the Court explained that “(i]t was gen-

erally understood by 1871 that a municipality, like a private

corporation, was to be treated as a natural person subject to

suit for a wide range of tortious activity, but this under-

standing did not extend to the award of punitive or exem-

plary damages.” 453 U.S. at 259-260 (footnote omitted).

“Finding no evidence that Congress intended to disturb the

settled common-law immunity,” id. at 266, and perceiving no

overriding policy justification for subjecting municipalities to

punitive damages under Section 1983, id. at 266-271, the

Court construed that statute not to authorize a punitive

damages award against a local government. Municipalities

remained proper defendants under Section 1983, and com-

pensatory damages remained available in actions against

local governments. Because Section 1983 does not explicitly

authorize punitive damages, let alone require that they be

awarded in any particular case, the determination that puni-

tive damages were not an appropriate item of relief in a suit

against a municipality was entirely consistent with the

Court’s recognition that a municipality is a “person.” Taken

together, this Court’s decisions in Monell and Fact Concerts

interpreted Section 1983 in a manner consistent both with

the understanding of the term “person” that prevailed in

1871, and with 1871-era judicial opinions regarding the

appropriate scope of remedies in a suit against a local

government.

Unlike Section 1983, the FCA precisely defines the sanc-

tions to be imposed on any “person” who is found to have

committed the acts proscribed by the statute. 31 U.S.C.

3729(a). In light of the established meaning of the word

“person,” the clear import of the statutory text is that the

remedies specified in Section 3729(a)—treble damages and

civil penalties—may properly be imposed upon localities.

Petitioner is therefore wrong in contending that It he text

of the 1986 amendments contains no expression of any intent

by Congress that the FCA’s punitive damages be imposed

on local governments.” Pet. Br. 26. Although the amended

Section 3729 does not refer in terms to local governments

(just as it does not refer in terms to commercial corpora-

tions), the term “person” has long been understood to en-

compass counties and municipalities, and the FCA unam-

biguously imposes liability for treble damages and civil

penalties on “{aJny person” who commits the proscribed acts.

Petitioner seeks to use the “presumption that local govern-

ments are not subject to punitive damages” (id. at 24), not as

a default rule that applies in the absence of express

congressional guidance, but as a basis for departing from the

pertinent statutory language. Fact Concerts does not sup-

port that approach.

b. Although the remedies mandated by the FCA may

serve in part to punish wrongdoers, they are sufficiently dif-

ferent from traditional punitive damages that the policy

concerns identified in Fact Concerts (see 453 U.S. at 266-271)

apply with sharply reduced force. Cf. American Soc y. of

Mech. Eng’rs, Inc. v. Hydrolevel Corp., 456 U.S. 556, 576

(1982) (explaining that the “rule limiting [a] principal’s liabil-

ity for punitive damages do not apply to special statutes

giving triple damages”). The Court in Fact Concerts noted

“the broad discretion traditionally accorded to juries in

assessing the amount of punitive damages,” and it observed

that “[blecause evidence of a tortfeasor’s wealth is tradi-

tionally admissible as a measure of the amount of punitive

damages that should be awarded, the unlimited taxing power

of a municipality may have a prejudicial impact on the jury,

in effect encouraging it to impose a sizable award.” 453 U.S.

at 270. Under the FCA, by contrast, the scope of the award

is not left to the discretion of the jury but is instead specified

by the statute. There is consequently no danger that the

(actual or perceived) wealth of a local governmental defen-

dant will induce the jury to award punitive remedies greater

than those that Congress deemed appropriate for FCA

violations generally. And because the bulk of any recovery

in a qui tam action goes to the federal government, the con-

cern that a punitive damages award will divert public

resources to private hands (see id. at 267) has significantly

less force in this setting.

The conduct proscribed by the FCA, moreover, has an

inherent financial component: the Act is directed at corrupt

efforts to obtain federal money. As the court of appeals rec-

ognized, ſulnder the FCA, at least a portion of the recovery

will come from the monies taken by the municipality through

its false claims, whereas under § 1983 both the compensatory

and punitive damages come directly from the tax base.”

Pet. App. 15a. The financial character of the prohibited

conduct also increases the likelihood that the availability of

FCA remedies will deter municipal violations. The Court in

Fact Concerts found it “far from clear that municipal

officials, including those at the policymaking level, would be

deterred from wrongdoing by the knowledge that large

punitive awards could be assessed based on the wealth of

their municipality.” 453 U.S. at 268. FCA violations that are

attributable to local governmental bodies, however, will

6 The concern that public resources may be diverted to private parties

is especially misplaced with respect to FCA suits initiated by the federal

government, in which the United States retains the entirety of any award.

The clear thrust of petitioner's argument is that local governments are

exempt from FCA liability in those suits as well. See Pet. Br. 37-38

(arguing that exemption of local governments from the FCA's coverage

leaves avenues of redress other than the FCA).

often result from the responsible officials’ illicit efforts to

obtain federal money for their localities. A local official who

is willing to act dishonestly in order to further the locality’s

financial interests may well be deterred by the prospect that

substantial monetary liability will be imposed upon the local

government.

e. Fact Concerts does not support petitioner’s contention

that the 1986 amendments ousted localities from the FCA’s

coverage entirely. In holding that municipalities are not

subject to punitive damages in suits under 42 U.S.C. 1983,

the Court in Fact Concerts did not cast doubt on the prior

determination in Monell that a local government is a proper

defendant under Section 1983 and may be sued for appropri-

ate compensatory relief. See Fact Concerts, 453 U.S. at 267

(because punitive damages “are assessed over and above the

amount necessary to compensate the injured party * * *,

there is no question here of equitably distributing the losses

resulting from official misconduct”). In the present case, by

contrast, petitioner relies on the presumption that localities

are not subject to punitive remedies as a means of taking

municipalities completely outside the FCA’s coverage.”

There is no logical reason that Congress’s decision in 1986

to increase the sanctions for FCA violations would have led

it to exempt local governments from the sanctions to which

they had previously been subject. If Congress had deter-

7 Petitioner contends (Br. 37-38) that the United States will not be left

without redress because other mechanisms are available by which it may

recover losses caused by fraud. The House Report accompanying the 1986

FCA amendments observed, however, that “[{aJlthough the Government

may also pursue common law contract remedies, the False Claims Act is a

much more powerful tool in deterring fraud and is used as the primary

vehicle by the Government for recouping losses suffered through fraud.

Thus, it is important that it be an effective tool for recouping these losses.”

House Report 18. More broadly, the long history of qui tam actions under

the FCA underscores the congressional judgment that suits by the gov-

ernment alone may not be sufficient to deter false claims.

mined that the increased damages and civil penalties man-

dated by the 1986 amendments were not appropriately

imposed upon local governments, the far more natural course

would have been to retain, as to those defendants, the sanc-

tions (double damages plus $2000 per false claim) that were

available under the prior version of the Act. Congress did

not limit the available remedies in that manner, but instead

mandated categorically that the new remedial structure

would apply to “{aJny person” who engaged in the prohibited

conduct. The Fact Concerts presumption is not grounded in

the Constitution, but is merely an aid in ascertaining Con-

gress’s intent. It cannot bear the weight of attributing to

Congress the intent of ousting municipalities from the Act

entirely when it acted to expand liability for all defendants.

d. Congress’s 1985 amendment to the FCA underscores

the weakness of petitioner’s effort to rely on the Fact Con-

certs presumption to oust municipalities from the Act’s

coverage. In 1985, Congress expanded liability from double

to treble damages only for claims involving contracts with

the Department of Defense. See p. 3, supra. Under peti-

tioner’s theory, that amendment expressed a congressional

intent that municipalities should be treated as “persons”

subject to FCA liability for some government contracts but

not others (indeed, for all contracts except those as to which

Congress expressed the greatest concern). In reality, the

1985 amendment indicates that Congress has viewed the

questions of the Act’s coverage and the Act’s remedies as

distinct questions, and in expanding the scope of available

remedies in 1985 and 1986 did not simultaneously intend to

contract the scope of the Act’s coverage. The Senate Report

accompanying the 1986 FCA amendments explained that the

amendments provided for treble damages in FCA cases

generally in order “to comport with [the 1985] legislation

* * * which established treble damage liability for false

claims related to contracts with the Department of Defense.”

Senate Report 17.

C. The Court’s Decision In Stevens Does Not Control This

Case

The district court initially denied petitioner’s motion to

dismiss. Pet. App. 40a-46a. After this Court issued its deci-

sion in Stevens, however, the district court granted peti-

tioner’s motion for reconsideration and dismissed respon-

dent’s claims. Id. at 27a-29a. The court’s reliance on Stevens

was misplaced.*

1. Local Governments Are Frequently Subjected To

Forms Of Liability From Which The States Are

Exempt

The holding in Stevens—i.e., that States are not subject to

qui tam suits under the FCA—is not controlling here, since

there is nothing anomalous about subjecting local govern-

ments to forms of liability from which the States are exempt.

To the contrary, this Court has frequently recognized that

state and local governments stand on quite different consti-

tutional footing. See Pet. App. 19a (noting “the established

doctrinal differences, long recognized in our jurisprudence,

between the status of the states of the Union and municipal

entities.”).

The suit in Stevens was brought by a qui tam relator, and the

Court’s holding was limited by its terms to the proposition that a State or

state agency is not subject to FCA liability in such private actions. 529

U.S. at 787-788. The Court did not purport to resolve the

initiated by the federal government. The clear import of petitioner's

argument, however, is that local governments are exempt from liability in

that category of suits as well as in qui tam actions. See note 6, supra.

Thus, an “important limit to the principle of sovereign

immunity is that it bars suits against States but not lesser

entities. The immunity does not extend to suits prosecuted

against a municipal corporation or other governmental entity

which is not an arm of the State.” Alden v. Maine, 527 U.S.

706, 756 (1999); see, e.g., Mount Healthy City Bd. of Educ. v.

Doyle, 429 U.S. 274, 280 (1977) (“The bar of the Eleventh

Amendment to suit in federal courts extends to States and

state officials in appropriate circumstances, but does not ex-

tend to counties and similar municipal corporations.”) (cita-

tions omitted). The general interpretive rule that local gov-

ernments are presumptively encompassed by the word

“person,” while States presumptively are not, reflects the

States’ distinct sovereign status. See Stevens, 529 U.S. at

780 (“We must apply to [31 U.S.C. 3729) ] our longstanding

interpretive presumption that ‘person’ does not include the

sovereign.”); id. at 780-781 & n.9 (explaining that in light of

the States’ sovereign status, “both comity and respect for

our federal system demand that something more than mere

use of the word ‘person’ demonstrate the federal intent to

authorize unconsented private suit against them”); Will v.

Michigan Dep't of State Police, 491 U.S. 58, 70 (1989) (hold-

ing that a State is not a “person” subject to liability under 42

U.S.C. 1983, and explaining that “it does not follow that if

municipalities are persons then so are States. States are

protected by the Eleventh Amendment while municipalities

are not”).

2. The Reasoning Of The Court In Stevens Does Not

Indicate That Local Governments Are Exempt

From Liability Under The FCA

The reasoning of the Court in Stevens provides little sup-

port for petitioner’s contention that it is exempt from qui

tam liability under the Act. The linchpin of the Court’s

analysis—its recognition that the word “person” in 31 U.S.C.

3729(a) should be construed in light of background

understandings of that term, see 529 U.S. at 780-782—cuts

against petitioner’s position in this case, since the term pre-

sumptively encompasses local governmental units. The

Court in Stevens also noted that States are expressly

included in the definition of “person” in 31 U.S.C. 3733(1)(4),

which applies to the FCA’s provisions for issuance of civil

investigative demands. 529 U.S. at 783-784. From the

absence of a comparable reference to States in Section

3729%a), the Court inferred that Congress did not intend to

subject the States to qui tam liability. Id. at 784. The Court

made clear, however, that its reasoning would not apply to

any entities described in Section 37330004) that are pre-

sumptively covered by the term “person.” Id. at 784 n.14.

The Court in Stevens also found that States are not in-

cluded in the definition of “person” contained in the Program

Fraud Civil Remedies Act of 1986 (PFCRA), 31 U.S.C. 3801

et seq., a parallel scheme that created administrative reme-

dies in cases involving false claims. 529 U.S. at 786. The

Court stated that “[iJt would be most peculiar to subject

States to treble damages and civil penalties in qui tam

actions under the FCA, but exempt them from the relatively

smaller damages provided under the PFCRA.” Ibid. Be-

cause the “persons” subject to potential liability under the

PFCRA include “any * * * corporation,” ibid. (quoting 31

U.S.C. 3801(a)(6)), respondent and other local governments

are covered by the PFCRA, and the potential anomaly noted

by the Stevens Court therefore does not exist here. The

Court in Stevens further explained that its reading of Section

3729%(a) as excluding States would preserve the federal-state

balance and would obviate the need to resolve a serious

Eleventh Amendment question. 529 U.S. at 787. Because

petitioner is not an “arm of the State” of Illinois and has no

immunity from suit under the Eleventh Amendment, see

p. 27, supra, those concerns are inapplicable in this case.

In granting petitioner’s motion to dismiss, the district

court relied almost exclusively on the Stevens Court’s deter-

mination that the remedies available under the FCA are

“punitive” in character. See Pet. App. 28a-29a. In Stevens,

however, this Court invoked “the presumption against impo-

sition of punitive damages on governmental entities” (529

U.S. at 785) simply as an additional factor that reinforced the

presumption against interpreting the term “person” to

include the sovereign and confirmed what the Court other-

wise regarded as the most natural reading of the statutory

language. See id. at 784-786. Nothing in Stevens suggests

that a court may disregard the presumption in favor of

interpreting the term “person” to include corporations, the

established meaning of a statutory term, and other indicia of

congressional intent, in order to avoid subjecting a local gov-

ernment to sanctions having an essentially punitive

component.

CONCLUSION

The judgment of the court of appeals should be affirmed.

Respectfully submitted.